IMF gives its backing to George Osborne’s tough spending cuts

George Osborne received a boost yesterday after the International Monetary Fund backed his squeeze on the economy and said the economic setbacks were temporary.

Support: Chancellor George Osborne

The chancellorâs programme of spending cuts and tax rises to eliminate Britainâs structural deficit âremained essentialâ, said John Lipsky, acting head of the IMF, despite cutting the growth forecast for 2011 from two per cent to 1.5 per cent.

âThe weakness in economic growth and rise in inflation over the last several months was unexpected,â he continued.

âThis raises the question whether it is time to adjust macro-economic policies. The answer is no as the deviations are largely temporary.â

Signs of stalling growth in recent months have fuelled demands for a âPlan Bâ but Mr Osborne dismissed calls for a rethink.

âI welcome the IMFâs continued strong support for our overall macroeconomic policy mix, including our deficit reduction strategy,â he said.

Shadow chancellor Ed Balls said Mr Osborne âshould not take too much comfort from the reportâ.

He added: âThe cautious approach for George Osborne to take, and for the IMF to recommend, would be the one advocated by the deputy secretary-general of the OECD, who said only last month the pace of the cuts should be reconsidered if things turn out to be weaker than expected.â